NewStar 17 Sweetwater Springs DST

Overview

NewStar 17 Sweetwater Springs DST is a $39.4 million Delaware Statutory Trust offering Sweetwater Springs, a 95-townhome residential community (171,271 sq ft on 7.47 acres) built in 2021 at 1510 Duluth Highway in Lawrenceville, Georgia, in the Atlanta metro. Sponsored by NewStar Exchange - an Atlanta-based, vertically integrated real estate firm founded in 2021 by former Preferred Apartment Communities executives - the trust is capitalized with $21.8 million of equity and a $17.6 million Freddie Mac fixed-rate, interest-only loan at 5.10%. It projects a 4.40% first-year distribution rising to 6.02% by year 10 (4.73% average), with a $100,000 minimum for 1031 investors.

Highlights

95-townhome community built in 2021 in Lawrenceville, GA, in the high-growth Atlanta metro.

4.40% first-year distribution rising to 6.02% by year 10 (4.73% average).

$17.6M Freddie Mac fixed-rate (5.10%), interest-only loan; 44.7% LTV; roughly 2.06x Year-1 DSCR.

Sponsored by NewStar Exchange - Atlanta-based, vertically integrated, founded by former Preferred Apartment Communities (NYSE: APTS) executives.

$100,000 minimum (1031); 2021-built townhomes with private garages and smart-home features.

Analysis

Insights

A smaller, growth-oriented Atlanta townhome DST from an experienced-but-new sponsor. The rising yield and 2021 construction appeal to income investors comfortable with a newer sponsor and a single-asset, no-721 structure.

Advantages

Newer (2021) townhome product in a fast-growing Atlanta submarket; long-term fixed-rate agency (Freddie Mac) debt; experienced ex-PAC management team; rising distribution schedule.

Concerns

Newer DST sponsor with a limited DST track record; roughly 10.25% load on equity; no affiliated-REIT 721 exit; smaller single-asset offering; interest-only loan with balloon maturity in 2036.

Projected Distributions

Average Yield4.73%

Est. Tax-Adjusted Yield¹11.24%

Cap Rate Equivalent8.27%

Y14.40%

Y24.40%

Y34.40%

Y44.40%

Y54.45%

Y64.54%

Y74.54%

Y84.99%

Y95.17%

Y106.02%

Projected, not guaranteed. Distribution rates are the sponsor’s projections, are not a promise of performance, and can be reduced or suspended. ¹ Estimated Tax-Adjusted Yield reflects the projected impact of depreciation and amortization deductions at an assumed combined federal and state tax rate; individual tax outcomes vary — consult your CPA regarding your specific situation. Cap Rate Equivalent is a Baker 1031 Investments calculation intended to allow comparison with direct property ownership; it is not a sponsor-reported figure and does not represent a rate of return. See the private placement memorandum for the assumptions behind these figures.

Financing

LenderNewPoint / Freddie Mac

Interest Rate5.10% (Fixed)

Loan Term10 years

I/O Period10 years

Amortization30 years (after I/O)

Y1 DSCR2.06x

Benchmarks

Avg. Income

This deal4.73%

Market4.99%

Meets Average

Growth

This deal36.82%

Market25.67%

Above Average

Peak

This deal6.02%

Market5.34%